Catching a falling knife

It is easy to convince yourself in a boom market, that in the long run, everything will work out well.  When the stock market is bathed in a sea of red, it is an opportunity to buy, a prelude to prosperity.

When the bear approaches and swipes the stock price off 20%, eager investors will swoop in to buy. However, as the bear did a second swipe and takes off another 20%, you start to wonder if you have did sufficient due diligence and bought at an overvalued price. The bear's fury swipes can be one instance, two instance, five instances and perhaps even more. This is the 2nd grizzly bear market I am in and buyers remorse is indeed incredibly difficult to stomach.

I have made a deliberate decision 4-5 months ago, to stay in cash as the markets' height are unsustainable. When I intiated a minimal position in tencent (one lot) to monitor for updates, I was not prepared for the volatility of Hong Kong market. The resistance line had barely just formed and it did another 2 subsequent crashes against the next resistance lines. PEG and PE ratio dropped below unprecedented lows and it is amazing how market sentiment can reverse so rapidly.

My current research interests are in HKEX and other SGX stocks. I have loaded my 2nd bullet but I am not sure what to fire at and when to fire it. I will be again using VIX as a gauge of volatility and market fear and intiate another position once VIX flattens / decrease and Mr Market stops being so temperamental. In the long run, it probably should not matter. In the short run, the sea of red is a gut wrenching sight to behold.

HK
HKEX
Tencent

US (ideally non dividend stocks)
Facebook
Alphabet
Kimberly clark
General Mills
Procter and Gamble
Colgate
MacDonald
Activision

SGX
OCBC
UOB
SATS
Straco
Suntec REIT
Ascendas I trust
Ascendas REIT
Hong Kong Land
Stamford land.

Comments

  1. Unintelligent Nerd29 October 2018 at 05:10

    Hi INTJ,

    Nice watchlist. Psst! You might wanna check out Hengan International on the HK market instead of KMB. I might initiate a position there while still retaining my KMB position.

    Colgate is good too. Still doing my due diligence on it. Might initiate a small position if my fingers are too itchy.

    ReplyDelete
    Replies
    1. INTJ31 October 2018 at 11:43

      Hi UnN,

      Nice of you to pay a visit and thanks for the tip.

      Hengan business summary seem to be similar to Kimberly Clark and the financials are very attractive at first glance. Short term debt level is pretty high so I might want to research more in it. It is a relatively risky play at first glance.

      Colgate is a similar consumer staples story with a high percentage of long term debt.

      If you want to invest in leveraged business, pay close attention to quality and volume of operating cash flow, proportion of bank callable debt, interest coverage ratio as well as free cash flow of company. Do your own due diligence and good luck!

      Delete

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